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Thursday, December 01, 2016

Home Seller Tips: Florida Real Estate Commissions and Fees

This discussion of real estate fees is important because fees are often the largest expense when selling a home in Florida.

Many folks have an image of real estate agents driving big, nice, new cars; dressing nice; going out to lunch every day, plenty of free time on the golf course or beach, and making lots of money.  But that would definitely be the exception.  

Most agents work hard, often 7 days a week, eat lunch in the office or on the run in an older car, and juggle multiple schedules and make about $25,000 a year.  That $25,000 comes from fees charged to clients (most often the seller).

Quite often on listing appointments the discussion of will turn to how much a prospective listing real estate agent charges.   This is an important question because it is likely the highest seller cost when selling real estate. 

Here in Brevard County, Florida there are some basic (unwritten) rules about real estate agent commissions.   First, a couple of basic fee truths:
  • There is no standard real estate fee
  • Real estate commissions are negotiable.  Sellers typically pay the buyer's real estate agent (as well as their own).
  • The total fee charged is usually split 50/50 between the listing office and buyer office. 
Real estate agents are almost all independent contractors with overhead expenses and no salary.  Real estate agents get paid when property sells - not gets listed.

Because selling is more than just putting a sign out front it is important sellers understand the marketing process is labor intensive and with cost.

More importantly, sellers should understand the need to pay another agent  because the likelihood of another agent bringing the buyer is high.   For example, here in Brevard County there are about 4,000 real estate agents.  Basically there are 3,999 more opportunities for a buyer to be obtained by others.

And that buyer's agent will need to be paid by the fee split.

I recently was asked by a seller "How much of the fee will the buyer's agent get?" 

My all depends.

Most real estate agents are independent contractors who work on a commission split with their employing broker. 

For example, lets say the seller is paying the buyer side .025% on a $200,000 sale.

.025% times $200,000 is $5,000.   

Seems like a lot of money for the buyer's agent!  But, if the agent is on a 75/25 split with their broker the $5,000 becomes $3,750.  Still looks good, right?

But agents, as independent contractors, now must pay their own social security/medicare/self employment/income taxes. While these vary from individually, suffice it to say a conservative figure would be 35-40% of earnings.  $3,750 is now about $2,250.  Still, not bad right?

But think about the expenses and overhead an agent covers... car, gas, insurance, multiple listing fees, state, local and nation Realtor Association dues (must pay in order to use/advertise in MLS system), etc.  Just a shot in the dark estimate o $500-$750 a month for these and then the $2,250 is now $1,500.

If an agent closes one transaction a month that becomes $18,000 a year.  But it is not that gloomy.  The latest I have read is the average real estate agent makes about $25,000 a year.

So, sellers, when paying the buyer's agent, don't complain.  You are really getting a lot of work for your money!

My opinion... if any agent is going to get less, it should be the seller's agent.  

But then, fees are negotiable.
If you are considering selling your Viera or Melbourne, Florida home, give me a call at 321-693-3850. 

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